Bitcoin (BTC) appears set to challenge record highs in the wake of this week’s dovish Federal Reserve meeting.
One expert, however, is calling caution, based on his observation of price charts as bitcoin rose from lows near $43,000 seen earlier this month. The chart pattern has taken the shape of what’s known as a rising wedge, a sign of uptrend fatigue.
“My concern is growing that we might run into a rising wedge scenario,” Patrick Heusser, head of trading at Swiss-based Crypto Finance AG, told CoinDesk in a Telegram chat. The wedge’s support line is pretty strong, with more than four touchpoints, and that does give me some confidence, though, if we break lower through the trendline, which is when things could get ugly.”
The rising wedge comprises converging trendlines connecting higher lows and higher highs. The converging nature of the trendline indicates the waning of upside momentum. Hence, a breakdown – a move below the lower end of the rising wedge – is considered a sign of bullish-to-bearish trend change.
According to Heusser, a move below $54,000 would confirm the rising wedge breakdown and open the doors for a drop to $47,000. The immediate bias will remain bullish while the wedge support is held intact.
At press time, bitcoin is changing hands near $58,900, having put in lows under $56,500 early Friday, according to CoinDesk 20 data.
The cryptocurrency jumped from $55,000 to $60,000 earlier this week after the Fed signaled no interest rate hike until at least 2024, pushing back against growing fears of an early unwinding monetary stimulus.
Some analysts say the Fed’s dovish tone has put the cryptocurrency on the path to new record highs above $62,000. Patrick voiced similar opinion, while pointing to the rising wedge.
“In terms of the bigger picture, I see no change. We are still in a bullish scenario, but the consolidation phase will take a little longer and that is not a bad thing,” Heusser said.